Value-Based Pricing
Categories: Company Management, Metrics
“Value-based pricing” basically happens when a company establishes the price of a good or service based on what it’s worth to the consumer, instead of how much it costs to produce.
For example, if people are willing to pay $1,400 for a pair of designer go-go boots, then it doesn’t matter that they only cost the company $12.75 to make; the company is still going to charge $1,400.
But the winds of fashion are fickle indeed. Once our go-go boots designer is no longer cool, customers aren’t going to be willing to pay as much for their stuff, and they’re probably going to have to drop their prices accordingly if they want to stay in business.
